Digging our way out of Labour’s black hole

Tuesday 18 May 2010 11:36 BST

The row over Labour's last spending commitments and whether they will be scrapped is useful to ministers.

Revelations such as the money Lord Mandelson signed off in loans to the car industry and the note left by outgoing Chief Secretary to the Treasury Liam Byrne for his successor, David Laws, saying "there is no money", merely allow ministers to portray swingeing cuts to come as the fault of their profligate predecessors. But the sums involved are relatively minor: the real pain in both tax rises and spending cuts is yet to come.

The broadside fired by Tory Right-winger John Redwood today on capital gains tax is one harbinger of the trouble to come. Mr Redwood describes the proposed CGT rise as "anathema to most Conservatives" and suggests tapering the tax hike over time to reward those who invest for the longer term. The increase in CGT will bring similar howls of pain from second-home owners in the Conservative heartlands. The more serious danger for London is if such tax hikes are seen as damaging the capital's reputation as a place for entrepreneurs to do business.

Such extra tax revenues will not be enough to patch up the public finances, though, not least because of the new spending commitment represented by the Lib-Dems' plan to take the lowest earners out of the tax system. The Institute for Fiscal Studies has predicted cuts of up to 25 per cent in non-ringfenced Whitehall departments. A 24 per cent cut at the Department for Transport, says the Financial Times, would mean, say, stopping all current and capital expenditure on roads; for the Ministry of Justice, such a cut is equivalent to shutting two-thirds of all prisons. These will not happen, but they give an idea of the slashing of services that will be required to come close to the Tories' ambitions in reducing the deficit.

Wasteful spending must be ruthlessly targeted. There are white elephants such as the ID cards scheme where easy savings can be made. But months down the line from the present changing of the guard in Whitehall, there will be harder decisions to make — and fewer people to blame.

BA's pain goes on

British Airways has scored only a Pyrrhic victory with the court decision overturning the strike planned for today on a minor technicality. The decision came so late that the airline has had to cancel half of all its short-haul flights and 40 per cent of long-haul flights from Heathrow. The bigger problem is that there is still no sign of progress on tackling the cause of the strikes, the airline's dispute with Unite over cabin crew staffing levels and perks.

Chief executive Willie Walsh deserves credit for his single-mindedness in trying to turn BA around. But it remains stuck with an institutional culture and labour relations more akin to its public-sector roots: its unions still dig their heels in for terms and conditions which have been abandoned in most of the rest of the industry. Now the strikes are adding to woes piled up by the recession and the volcanic ash cloud: the damage to the company's reputation could be lasting. Until Mr Walsh sorts out its working practices, BA's troubles will recur.

Aye, Mr Speaker

The campaign against Commons Speaker John Bercow, set to be the first in living memory to have his re-appointment challenged, is misguided. It is hardly surprising that some Tory MPs are irritated with Mr Bercow for his supposed disloyalty to the party. But he has done a reasonable job so far and retains the new PM's support. He should stay.